"They built Microsoft TV, they demoed it for us, they asked for rate cards but then said 'ooh ah, that's expensive'," alleged one executive involved in the talks.

At issue were MS' hopes to offer content at the same time as the material is broadcast or released in cinemas. Services like Netflix and the Amazon-owned Lovfilm generally post material not when it is first released or broadcast, but at the time pre-recorded media are made available, rights for which are much cheaper than those for initial release.

A shame, really, because initial plans for the service suggested a Microsoft service built around Kinect-like features for voice and gesture control.

As it stands, Microsoft's Xbox Live platform delivers various content through a host of apps to existing subscribers. ®